Congratulations! You just got into one or more of the colleges of your choice. If you’re not on a state prepaid program, like Florida Prepaid, and you filed the Free Application for Federal Student Aid (FAFSA) you are going to get an acceptance with a cost that the school says is what they believe you should pay.
The first number is rarely the final number. Arriving at a financial aid package that works for you is a bit like shopping for a car, or haggling in a Turkish bazaar for a gold vase. Where you ultimately go will also be the school where they work hard enough to keep you.
NEGOTIATE YOUR DEAL
They say: “$15,000.”
You say “$5,000.”
They say: “We really can’t do any better than that.”
You say: “That’s too big a percentage of my family’s annual income. I have two siblings in private school and mom is on partial disability. You’ve seen our FAFSA. That’s way too much. Thank you for admitting me, and this really is my top school, but I also got into three other excellent schools, and they’re all offering me better money. Is there anything that we can do?
You have options that you can ask about:
- Work-study – Schools offer jobs on campus that pay a wage that offsets what you owe for college;
- A Job – Schools also have lots of on-campus jobs that pay, often better than what you’d find in the surrounding community. Some jobs are in the academic areas, but student stores, sports arenas, food service, and more all offer employment opportunities. Part-time jobs off campus, especially waiting tables, parking cars, or other tippable jobs can provide enough money to pay any balances due plus provide for the extras beyond what scholarship and merit take care of.
- Performing offsets – Football players can’t get paid, but the musicians in the marching bands and ensembles used by the institution for dinners, galas, etc. should get some compensation for their talents. The win-win for the school is to take it off of your tuition.
- Merit-based scholarships – Some schools do not offer them, although many still do. Hampshire College has offered a $6,000/year merit credit for students who have displayed exceptional musical talent in high school, without requiring the student to perform in college. Great grades as a high school senior may bring you some substantial aid. You have to work hard, though, in college, for some, because they’re based on your continued academic excellence.
- School-based scholarships – Financial assistance is offered frequently by student unions, fraternities, and other organizations affiliated with the institution. President’s scholarships, scholarships from a distinguished alumnus/alumna of the school, corporate scholarships in certain fields of study, and other opportunities arise for you if you attend the school.
- School-based loans – Some schools offer their own, more humane loan packages. Ask.
- State/Country grant programs – Some states, and even countries, to attract talent to their colleges, offer government grants, most of which are outright grants, and not loans, so you don’t have to repay them.
- 529 Funds – You, your parents, friends, well-wishers, or even a crowdfunding project’s revenue can be put into the 529 Fund system to be invested for your college in future years. Depending upon what you choose to invest in, within the funds, with some advice from a planner, you can develop extra money in interest and in growth of your investments. Taking the money out for school purposes makes whatever you earned tax free, which gives your money even more lift. Ask your tax preparer what the advantages or disadvantages are of the 529s.
- Applying for external scholarships should become part of your regular process while in college. The more the better. None are too small, as they add up.
- Internships/Apprenticeships – Some schools will offer the ability to get real-world experience and be paid towards your tuition.
- Private Loans – If there is someone willing to make you a personal loan, they can often be set lower, at 3.0%-4%, rather than 6%.
- Employer-based scholarships – Starbucks, Publix and others offer scholarships or tuition assistance for employees and/or their dependents.
- Public Service (Americorps) – There are scholarships available to people who join Americorps and do public service work.
- Special circumstances scholarships – There are scholarships for the children of veterans, police, school teachers, or emergency service people killed in the line of duty. If your circumstances fit the scholarship, apply. They often work in your favor.
After considering all of those options, ask: “Is there ________________ (see above) that we can use to bring the number down?”
They ask to get back to you, then do: “We can put in work-study and there is a university-based President’s Scholarship that we can give you, which brings us to $8,000. You can take a Stafford Loan for $3,000.00″
You say: “Subsidized or unsubsidized?”
A subsidized Stafford loan means that they pay the interest on the money borrowed while you’re in school. You pay the interest after you finish school.
An unsubsidized Stafford loan means that the interest charges keep growing as you go through school, and you are responsible for them.
They tell you that it’s unsubsidized.
You say: “That’s very kind of you, but again, I can’t afford to watch the interest keep escalating on my unpaid student debt for four years. Tell you what: If you can get us to $7,000, and offer a subsidized Stafford loan for $2,000, then we have a deal.”
The Stafford Loan SECRET
As a general rule, you do not want to take more in student debt than you can pay off over the school year that you draw it from.
Students are told that they don’t have to pay their loans until they graduate from school, but those unsubsidized $5000.00 loans, if they’re unsubsidized, as most are, accrue a lot of interest. Leave it alone for the four years, with loan rates between 4.5% and 6% APR, and it could easily turn into $6,600 or more.
There is a way, though to use Stafford debt to your advantage, even if they won’t offer you a subsidized loan.
Take a job. preferably with tips, like waiting tables. Salary is bleak, but the tips are good.
Paying off a doable amount, say $3,000 is not as bleak as it sounds.
Here’s how you can pay off your debt in full over the school year, magically transforming your credit score into gold.
Pay the same amount on your loan, but in smaller, weekly chunks.
Interest is calculated by the number of days that you borrow the “principle,” the $2,000. So, the more often that you keep chipping away at the principle bi-weekly or weekly, it lowers what you pay in interest over time.
|Payment Period||Payment||Total Monthly Payment||Total Loan Interest|
So send a check every two weeks, pulled from your wages. $119 can be pretty doable. As very few students pay off their student loans until years later, if at all, those who take out manageable loans and pay them back in full each academic year become exceptionally credit-worthy by the time that they graduate college. That can help you, as an adult, with credit card interest rates, auto loans, home loans, and more.
DIRECT LOANS PLUS
Avoid. Avoid. Avoid. These loans have lower credit requirements but nearly 8% interest rates.
Banks like Wells Fargo and Discover offer college loans but their rates are usually terrible. DO NOT EVER take a variable rate loan for your college tuition. They can look attractive at the low end, but if the economy changes
Some students will work for a year after high school to build up enough cash, preferably invested into a 529 fund where it will grow for them tax-free, so that they can enter after a deferral year with enough set-aside to help fill the need.